How are demographic factors and changing consumer preferences affecting the hospitality industry?

Warren Marr: For quite a few years, commercial business travel has been dominated by the baby boomers. While the baby boomers are still a powerful force, generation X and the millennials are starting to increase their purchasing power within the sector. People in their 20s and early 30s are looking to spend less time in the guest room and more time interacting in the public areas of their hotel. Instead of logging onto their computer at a desk in their hotel room, they’re more likely to go down to the lobby or the lounge and connect that way. So, many hotel brands are changing the way they design their common areas.

Steven Angel: Hotel brands are focusing on the next generation of business and leisure travelers—the millennials. In response to their preferences, hotels are providing more robust and vibrant public areas that can serve as gathering points or places to hang out. The interesting challenge will be achieving the best balance so that hotels meet the needs of the younger traveler without alienating older and more traditional guests.

Allison Reid: Travelers in general are becoming less formal [and] more self-reliant than previous generations. They’re digital. Everyone is connected and time-constrained, so they’re focused on doing more with less. Also, sustainability issues are front and center for our guests and their professional organizations. All of our projects today incorporate both digital and sustainability aspects. These are critical areas for developers to consider.

Jeffrey Quicksilver: A new generation of consumers is driving the continued emergence of the boutique brand. You continue to see that with Marriott’s Autograph Collection and Hilton’s Curio Collection. Even the independent brands, such as SLS Hotels, Ace Hotels, Thompson Hotels, and James Hotels, are trying to become more like boutiques. Owners are questioning whether they need to pay for a big brand, because customers are now less willing to pay for the luxury that some of the big brands have traditionally offered. Young people don’t want the turn-down and concierge services anymore. They’re looking for a certain kind of atmosphere and sleekness that they get with boutique hotels.

Kevin Jacobs: People’s propensity to travel is changing around the globe, with a rapidly expanding middle class that over the last two decades has gone from a billion to 2 billion people and is expected to go to 5 billion by around 2030. Over the last two decades, the number of cross-border travelers has doubled—and that number is expected to almost double again over the next two decades. So, we have to think more about what those travelers expect from us, culturally, when they arrive at our hotel. Also, in the United States, there are nearly 16 hotel rooms per every 1,000 people; in places like China and Brazil, there is roughly one per 1,000. So we are focusing our growth globally to match up with this heightened demand.

What impact is technology having?

Jacobs: Guests today are looking for more choice and control. We recently launched digital check-in and room selection, which allow our customers to check in online or with their smartphones the same way they can check in online for their airline flights. In six of our brands in the United States, we now have virtual floor maps available so guests can choose their room online, and we expect to offer that globally by the end of the year. Guests can use the internet to request an amenity in their room, order a spa service, make a dinner reservation, and also check out. Next year, we will begin to equip our hotel rooms with the technology to allow guests to unlock their doors with their smartphones, enabling them to go straight to their rooms upon arrival.

Angel: The need for impeccable wireless internet infrastructure is growing. And it’s important for the hospitality industry to keep up with technology, whether that means communicating with guests via texting or providing an app that lets guests use their cellphones to open the door to their rooms. Even with in-room entertainment, the cutting edge is always changing. The traditional pay-per-view movie model seems to be going out the window. I think it’s only a matter of time until we see a model that allows guests to take content on their own devices and “throw it” onto the guest-room TV screen using something similar to Apple TV or Chromecast.

Marr: Hotels can’t have too much bandwidth for today’s traveler. The speed of internet service is critical, and the younger the guest, the more need for speed. The industry continues to try to catch up in this area, because as soon as it gets to a level that satisfies the type of technology out there, new technology with greater bandwidth requirements comes out.

Reid: Travelers are taking their technology with them wherever they go. That changes the paradigms of what public spaces, including hotel rooms, lobbies, and gyms, should look like. Before, you had to have a wall for a TV and a desk for guests’ laptops or computers. But now technology is small and mobile. I don’t travel with my laptop anymore, because I can handle business with my iPad or iPhone—and that’s true for a lot of travelers. This creates a paradigm shift for the standard room configuration.

How are online booking sites and Airbnb changing the way hotels do business?

Angel: Sites such as Airbnb have created quite a buzz. I think that it will have less direct impact on the hospitality industry than expected, and that as the model gets wider exposure, it will continue to expose some of the basic flaws with peer-to-peer renting environments that don’t offer the security or assurances of a commercial lodging establishment. Some of the concerns around services like Airbnb are overblown. Online travel agencies like Expedia, Priceline, and Booking.com have been around so long that the next level of integration is to find a balance between provider and intermediary that ends up looking a lot more like a traditional travel agency experience, but perhaps at a moderately higher commission level.

Quicksilver: Booking windows are shortening because people have access to so much data now. It used to be that a group would have to call five or ten hotels, six months to a year in advance of a convention, to secure space. Now, smaller groups can simply go online without having to worry about being squeezed out. That’s part of the “boutique­ification” of the hotel sector—the boutique hotels cater to the type of consumer who makes use of online marketing and booking capabilities. More business will shift to online services like Expedia, and there will be less brand allegiance.

What’s happening on the financing side?

Reid: Construction finance is back for some projects. In the lodging sector, it started in the limited- and select-service hotels, likely because they are generally a less risky proposition—they take somewhere between 18 and 24 months to build, have minimal costs, and were financed primarily by regional or relationship banks. Eventually, the national lenders started to make capital available for good sponsors in strong markets. We are starting to see a pickup in the luxury segment as well, mainly in urban areas, and most projects have a residential component. The luxury side came back faster than most people anticipated. Last year, about 80 percent of our builds were select-service hotels, and about 65 percent were renovations or repositionings. This year, we’re at about 60 percent select-service, 40 percent full-service or luxury, and more than half of them are new builds. That’s how quickly the market has transformed.

Jacobs: Hilton Worldwide has grown by 40 percent since acquisition in 2007. Almost all of that growth has been in the management of franchises—what we call our “capital light” strategy. We still own a substantial real estate business, but that’s a legacy business, and we’re growing by optimizing properties from an asset management perspective. None of the hotels in our pipeline—which have a total of roughly 210,000 rooms—[is] going to be owned or leased by us. They will all be either managed or franchised.

Quicksilver: The securitization market for hotels is coming back, which is helping to drive pricing in this sector—not only as a result of performance and cash flow, but also as a result of the improved financing market for hotels. It’s becoming more competitive to find attractive investment opportunities. One thing that’s attractive about hotels is that it is possible to find properties that you can buy today with yield and—with attractive leverage—generate high-cash-flow yields. That allows you to get a significant part of your capital back through cash flow over time, so you don’t have to rely so much on residual and be exposed to cap-rate risks in a rising interest rate environment. That’s better than buying vacant office buildings or other assets that have no cash flow today.

Marr: The hot topic in the press is crowdfunding. There is one major project that has used this to date, and that’s the renovation at a Hard Rock Hotel in Palm Springs. How much traction crowdfunding is actually going to get in the hotel sector remains to be seen. Traditional ways of financing hotels, which everybody said had gone away after the recession, are back, even if the underwriting is more strict.

What other trends are having an effect?

Quicksilver: This is true of the real estate industry as a whole: we have to watch new supply. Hotel construction is increasing in most markets, and as performance continues to improve and pricing continues to increase, hotel development is becoming an attractive option for investors.

Reid: Customers are used to less formal work environments, and that’s influencing the design of multipurpose spaces: lobbies, meeting rooms, guest rooms, and gyms. It used to be that a hotel ballroom had air walls that could slide to break the space into smaller rooms. Now, meeting spaces have removable walls, and restaurants have movable walls so they can turn into meeting spaces or banquet spaces. Meeting spaces offer more options, such as communal or high-top tables, stadium seating, casual seating options like beanbag chairs, and more outdoor spaces. This flexibility works for meeting planners, who are trying to create unique events, and it works for developers and hotel operators, who are trying to use space efficiently.

Jacobs: Customer preferences are changing with respect to some aspects of full-service hotels. For example, in a city like New York, customers can easily find great places to eat nearby, and they don’t necessarily want a white tablecloth hotel restaurant. So in a number of our hotels, we’ve changed our restaurant into a grab-and-go service. At the New York Hilton, we still serve breakfast, but otherwise customers can go downstairs, grab their own food—flatbread pizzas, premade salads, soups, sandwiches, etc.—and take it with them. They can order from their room and have it brought up in a brown bag.

Marr: Because of the number of new booking engines and the resultant ability of customers to find a hotel very quickly without going on the websites of the hotel brands, in certain markets, developers and property owners may choose not to go the traditional route of branding their hotels. Most recently, that has been happening more in major gateway markets like New York City than in secondary markets, but it’s happening. To help combat this, some hotel companies have come up with what is called “soft branding.” Owners of independent hotels keep the name of their hotel—so the ABC Hotel would still be called the ABC Hotel, but it could be part of, for example, Marriott’s Autograph Collection or Hilton’s new Curio Collection. These independent hotels can then access the hotel company’s reservation system and frequent-traveler programs, but at a lower cost of entry, with a brand standard that is much more flexible.

Angel: Ongoing globalization is having a big effect. The United States has made a lot of progress over the past several years in terms of easing the visa process and making it easier for international visitors to spend dollars here. That’s a tremendous opportunity—particularly for the gateway lodging market—and we’ve seen the impact already in places like Hawaii, with the influx of South Korean travelers, and the growing base of Chinese travelers beginning to visit the United States. That has the potential to provide a cushioning effect to any economic downturn over the next five years.

Ron Nyren is a freelance architecture and urban planning writer based in the San Francisco Bay area.

The “fear of missing out” is a major motivator for today’s most affluent millennials who want every travel moment to be memorable—and tweetable. From surfing and snowboarding to nightclubs and Nobu-style restaurants, hoteliers are addressing generation Y’s desires with exciting new branded concepts, said panelists at the 2014 ULI Fall Meeting in New York City.

With the tagline “the next little thing,” Yotel was inspired by the first-class cabins on British Airways, said Rohan Thakkar, Yotel director of development. “We provide a first-class hotel experience at an affordable price, with 170 square feet [15.8 sq m] of luxurious space,” he said. Rooms use space efficiently with a convertible bed, laptop safes, and plenty of storage. The concept employs high technology, epitomized by its robotic luggage concierge.

Yotel’s first concept—the airport hotel—opened in 2007. Situated inside terminal buildings at the Gatwick, Heathrow, and Amsterdam Schiphol airports, these hotels offer cabins that are bookable by the hour, with flexible check-in and check-out times.

Launched in New York in 2011, Yotel’s city product mixes flight cabin and boutique hotel concepts, with cabins 30 percent larger than those in the airport hotels plus floor-to-ceiling windows. Before the end of the year, the company will launch Yotel 2.0, with even more millennial-focused features.

Yotel’s New York City guests are encouraged to spend time outside their rooms, using free workstations, private club cabins for work or parties, communal dining featuring shareable small plates, and the city’s largest outdoor hotel terrace.

Perhaps the opposite of Yotel’s “small is beautiful” idea is that of Quiksilver Hotels and Resorts, which is leveraging a well-known 45-year-old global surfing brand. Cofounder Jake Schwartz, who grew up surfing in southern California along with along with cofounder Scott Madison, said that “Quicksilver gave us a set of brand values that go into everything from site location to operations.” Those values, he explained, include authenticity, heritage, stoke (enthusiasm), an ohana (family).

Millennials, he went on, constitute 30 percent of Quiksilver’s target market. “They are entitled and confident, tech-savvy, can’t be bought, civic-minded, tolerant, driven by peer opinions, and have ‘FOMO’—the fear of missing out,” he said. “This generation grew up with and participated in action sports, which represent a $350 billion industry that crosses generations and continues to grow faster than traditional sports. Hotels are traditionally about relaxation, but we want guests to be active.” Quiksilver also is targeting baby boomers, families, and “fun-seekers.”

Although the venture has completed a vacation rental property in Australia, the full concept is currently in the planning stages. The group is in negotiations to purchase a large tract of land in Palm Desert, California, where its planned resort could include a four-star, full-service hotel plus private villas, retail, and a range of innovative amenities including a wave pool, skate park, and spa. On-site organic gardens, communal tables, and food preparation demonstrations would highlight the dining experience. To combat FOMO, the resort would offer live music, education, fashion shows, corporate events, action sports lessons, outdoor festivals, family movie nights, and celebrity-studded extreme sports competitions.

Following Schwartz’s presentation, SB Entertainment (SBE) President Sam Bakhshandehpour said that he is not into action sports; rather, “I get you fat and drunk.” But his company shares Quiksilver’s vision of addressing the younger generation’s fear of missing out as well as their search for authenticity and recognition. Beginning with a single nightclub in Hollywood, SBE expanded its empire into hotels and now has four flags: SLS Hotels and Casinos, the Redbury Hotels, the Raleigh (which SBE manages for a venture headed by Tommy Hilfiger), and the soon-to-be-launched Hyde Hotels, Resorts, and Residences brand.

“Our [customers are] highly affluent, successful, discerning, and trendy,” Bakhshandehpour explained. “They welcome spending, but they want recognition. We aim to differentiate with a highly intuitive and personalized experience.” SBE’s brand and reach are furthered by partnerships with leading trendsetters and brands.

Global design icon Philippe Starck and James Beard award-winning chef José Andrés have collaborated in creating the food and beverage offerings. For its South Beach SLS hotel, the company had Starck design a show-stopping restaurant space for Los Angeles–based sushi chef Katsuya.

SBE partners with global brands to host and sponsor highly visible events around Hollywood’s Oscars and Golden Globe Awards, in addition to offering a variety of nightlife options year round. Technology will soon be used to recognize customers’ (almost) every need and desire. “This is an aspirational customer base,” the luxury hotelier concluded. “Tastes change rapidly, and they want to be recognized. If you don’t evolve, you get left behind.”

“I founded Montage in 2002 on the basis that old-world luxury is too pretentious,” said Alan J. Fuerstman, founder and CEO of Montage Hotels and Resorts, which currently has five destinations with rates beginning at $500 per night. “We stripped away the stiffness to create comfortable luxury, with incredible attention to detail, and found that this approach resonates well with guests of all ages.”

The first Montage opened in Laguna Beach, California, in 2003; all 250 of its rooms offer ocean views, and its villas sold at record prices. Five years later, the company opened in the heart of Beverly Hills, where—despite the economic downturn—residences sold at more than double the anticipated price. Next came Montage Deer Valley in Park City, Utah, where guests can not only ski in and ski out during the winter, but also enjoy hiking, mountain biking, archery, and other family-oriented activities year round. The newest Montage venture is at Kapalua Bay, where unsold fractional ownership inventory was converted into oceanfront hotel suites. Also opening earlier this year was the Inn at Palmetto Bluff in the South Carolina Low Country, combining for-sale cottages with a luxury hotel in a resort that offers golf, water sports, and equestrian activities.

With future generations in mind, Montage is launching a new brand, Pendry, “at the intersection of service and design.” “We are targeting the older end of the millennial generation, who love great design but are looking for more in service,” he noted. The first Pendry—named after a centuries-old British family whose motto is “know thyself”—is under construction in San Diego’s Gaslamp District. This and future Pendry hotels will be distinguished from the existing Montage brand by offering a “casual hip vibe” with exceptionally engaging technology, pop-up retail, and what could be called “twisted traditional luxury.” Under the direction of Fuerstman’s son, Michael, the Pendry brand “opens a much larger universe of destinations in which we can operate, helping us remain vigilant and disciplined.”

A rendering of Brickell City Centre in downtown Miami, which will offer retail, residential, hotel, office, and entertainment space. (Swire Properties Inc.)

On a sprawling nine-acre (3.6 ha) site in the heart of Miami, construction crews are working on the first above-ground levels of Brickell City Centre, a $1.05 billion project that proponents say will redefine the city’s downtown when the first phase is completed in 2015. Developed by Hong Kong–based Swire Properties, Brickell City Centre will bring 2.9 million square feet (270,000 sq m) of retail, residential, hotel, office, and entertainment space to an area that, not long ago, was known as a disconnected jumble of funky strip malls, isolated towers, and empty lots. Five towers will be added to the skyline when the initial construction is completed, with another office tower scheduled for completion in 2018.

Swire’s ambition is to create a destination retail and entertainment center in Brickell, the first of its kind in downtown Miami. The project is directly linked to the Metromover, a free, elevated electric tram run by Miami Dade Transit that operates on a 4.4-mile (7 km) loop, raising hopes that the project may spur growth of the slowly evolving mass transit system in one of the most car-obsessed cities in the country.

The project under construction includes two residential towers, a “wellness center” focused on health and medical services, and a hotel tower with 263 guest rooms and 89 serviced apartments, which will be operated by Swire’s East brand. In 2013, Swire purchased an adjacent lot, for which the firm has announced plans for an 80-story tower, which would be the tallest building in the southeastern United States, according to data tracked by the Council on Tall Buildings and Urban Habitat.

“This is creating what amounts to Miami’s version of Rockefeller Center,” says Neisen Kasdin, vice chair of the Miami Downtown Development Authority and office managing partner for Akerman, the law firm that served as land use counsel for Swire.

Brickell City Centre’s designers are also challenging Miami’s sometimes-brutal climate. The project’s most distinctive feature is a $20 million “climate ribbon,” a 150,000-square-foot (14,000 sq m) strip of steel, fabric, and glass covering the retail space that is designed to harness Miami’s Caribbean breezes while deflecting the sun to create a comfortable open-air shopping environment.

By assembling a nine-acre (2.2 ha) site, the developer was able to qualify the development as a special planning area, allowing more latitude to master-plan the area as a mixed-use development. (Swire Properties Inc.)

Rapid Growth

Brickell is defined as the waterfront district south of the Miami River, centered on the row of residential and office towers lining Brickell Avenue, the main north–south corridor. Brickell’s population more than doubled between 2000 and 2010, from 13,584 to 27,776, according to data from the U.S. Census Bureau. More than 63 buildings with 18,674 residential units were built in Brickell and the central business district during that decade, according to a report prepared for the Downtown Development Authority.

But, when the Miami condo market deflated in 2007, Brickell was one of the hardest-hit areas, with prices dropping as much as 50 percent in some buildings and a high level of foreclosures.

The redevelopment boom was only starting to reach the inland areas of Brickell, between Brickell Avenue and Interstate 95, when the market crashed. A few towers had been built during the boom years, but many of the low-rise buildings dated to the 1960s and 1970s. The city’s oldest local bar—the 102-year-old Tobacco Road—is a neighbor to the Swire site.

“It was a good place to go, safe to walk, but it had an old, funky Miami-town feel to it,” says Stephen Nostrand, chief executive officer of Coral Gables, Florida–based Colliers International, a real estate consultancy.

Swire began cobbling the land together in 2008, when a 5.6-acre (2.3 ha) parcel hit the market. A well-known builder of mixed-use projects in Asia, Swire had just one large-scale development in the United States: Brickell Key, a cluster of hotel and residential projects on a manmade island at the mouth of the Miami River. Swire acquired the site and the Brickell City Centre name in 1979 for $41.3 million in cash from lender iStar Financial.

“It was a unique opportunity,” says Chris Gandolfo, senior vice president of development for Swire Properties, the company’s U.S. subsidiary. “Did we have a vision for the property? To be perfectly honest, no.”

Above the retail corridor, an undulating trellis creates a climate ribbon that is designed to scoop cooling breezes from the southeast and collect rainwater. The ribbon also connects the project’s towers. (Swire Properties Inc.)

Special Zoning

But the developer spotted an opportunity. The Miami21 Plan—a reworking of the zoning laws and regulations that went into effect in 2010—permitted developers to create a special planning area for any project of at least nine acres (3.6 ha). The firm quickly acquired two more parcels adjacent to the original 5.65-acre (2.2 ha) site—the home of a tennis center and the headquarters for a bank—to cross the nine-acre threshold.

The special-area designation allowed Swire to master-plan the site with a “clean slate,” Gandolfo says. The acreage was also necessary to reach a critical mass for the retail center. The company wanted to use a mixed-use strategy it had successfully developed for three projects in Asia—Pacific Place in Hong Kong, TaiKoo Hui in Guangzhou, and the Dazhongli Center on Nanjing West Road in Shanghai, which is scheduled to be completed in 2016. Each was based on a large retail podium and included a direct link to mass transit.

For a billion-dollar project set to transform the heart of downtown, Brickell City Centre attracted remarkably little controversy. Swire agreed to relocate 40 historic oak, gumbo limbo, and strangler fig trees. “There was hardly any public dialogue,” says Craig Chester, former editor of Transit Miami, who lived in Brickell during the planning process. Chester was part of a group hoping to create more parks downtown. “Getting any kind of public space reserved or preserved has been an enormous challenge,” Chester said. With real estate values soaring, “it’s really difficult to stand in the way and say we need a park.”

The project was originally presented to the city in 2011, and ground-breaking ceremonies for Brickell City Centre were held in June 2012.

“Everyone was very excited that a group like Swire had decided to invest to that level in Miami, especially at a time when there was not much development activity,” says Alice Bravo, deputy city manager and chief of infrastructure for the city of Miami.

The project addressed several key concerns for the city. “They’re building it in the right place,” Bravo says. “This is the urban core where you are supposed to have high-density development.”

The final design came in under allowed density levels and included a two-level underground parking garage spanning four city blocks—the first attempt by a major developer to build underground parking despite Miami’s problematic groundwater table. To build the garage, teams used a newly developed deep-soil mixing technique to place a concrete plug and perimeter sheet piling, creating a dry hole for construction.

The underground parking, with 1,600 spaces, gave designers a simple way to engineer traffic flow and connect all the buildings underground. Traffic coming off I-95 heading east on the one-way Eighth Avenue, which links Brickell to Little Havana, will be able to quickly duck into the garage network. These vehicles will exit the garage into the flow of traffic on Sixth and Seventh avenues heading west to I-95, keeping traffic away from the current congestion on Brickell Avenue.

Building Connections

Brickell City Centre also addressed Miami’s goal of creating a large central development to connect the different blocks, including the much-lauded Mary Brickell Village, a low-scale, tree-lined district with small shops, restaurants, and a supermarket located one block from the Swire site. A master plan created for the area in 2010 by the Miami Downtown Development Authority emphasized the importance of a pedestrian focus in the area and the need to create street-level environments.

“When there is a conflict, the pedestrian rules,” says Javier Betancourt, deputy director of the Downtown Development Authority. “By and large, we want pedestrians on the street—and that is a much different concept for Florida.”

Brickell City Centre’s design by Miami-based Arquitectonica, an architecture firm, includes passageways that slice through the project, and sidewalks with cutbacks at the corners to allow for outdoor restaurants. The buildings are also connected above ground by bridges on different levels—a technique typically discouraged by Miami planners because of concern that bridges would take pedestrian traffic away from the streets.

“When dealing with a large project with retail, it is important to have horizontal connectivity on many levels,” Gandolfo says.

Arquitectonica has worked with Swire since the 1990s, including on the TaiKoo Hui center in Guangzhou, one of the models for Brickell City Centre. The firm’s design brings a modern element to Brickell’s skyline, with a series of notched and angled glass towers. Corners are sliced back, letting sunlight in and allowing for the creation of different open areas. The complex is dotted with rooftop green zones.

“It doesn’t want to be standoffish; it wants to blend,” says Arquitectonica vice president Anne Cotter.

Buildings are oriented to the north and south, exposing only the smaller sides to direct sunlight. In the residential building, balconies will stretch eight feet (2.4 m) deep, creating outdoor living areas and shade for the units below.

The aforementioned climate ribbon evolved from Swire’s insistence on making the retail center open-air, despite south Florida’s bouts of oppressive heat and drenching rainstorms. The undulating trellis is designed to control the center’s environment and connect the project’s towers. The structure is engineered to scoop wind from the southeast, catching the Caribbean breeze and redirecting it into the site at about seven to ten miles per hour (11 to 16 kmph), creating a cooling effect in the center, which will not be air conditioned. “It’s like a river that encourages the flow of the wind,” Cotter says.

The individual, semitranslucent blades of the steel, fabric, and glass ribbon are each designed to deflect the sun at peak periods, while still allowing natural light into the retail space. The ribbon is also designed to collect 5 million gallons (19 million liters) of rain­water a year for redistribution on the site.

But taming the effects of the weather will not be Brickell City Centre’s only challenge. Six years after the most devastating real estate collapse in modern history, Miami once again is awash in projects competing for customers. More than 159 towers are in development in the Miami-Dade area, including 26,000 residential units, according to CraneSpotters, an agency tracking the market. Outlying areas such as Wynwood, a downtrodden warehouse district turning into the SoHo of Miami; the nearby Midtown and Edgewater neighborhoods; and the fast-growing Design District are all trying to lure homebuyers and Miami shoppers.

Swire’s attempt to create a high-end retail and entertainment destination, including movie theaters and a bowling alley, is a game changer for downtown, local analysts say. The project is already affecting prices for commercial space in the area. “Everything is rising with the tide,” says John Ellis, an associate at Robert K. Futterman & Associates, a retail broker.

To manage the 500,000 square feet (47,000 sq m) of retail space, Swire has partnered with the Miami Beach–based Whitman Family Development, the company behind the luxury retail center in Bal Harbour, which is anchored by a Neiman Marcus department store and includes shops such as Alexander McQueen and Versace.

To succeed, Brickell City Centre’s retailers will need to attract a customer not accustomed to shopping downtown, Ellis notes. “It has to appeal to Joe Sixpack as well as the Asian tourist,” he says.

The inclusion of 820 residential units is a new twist for Swire; that element is missing from its similar projects in Asia. The residential market in Miami has rebounded, with prices up more than 20 percent in many areas over the past 18 months, and preconstruction sales have been booming, due in large part to buyers from Latin America. But Swire is marketing high-end luxury apartments several blocks from the waterfront in a neighborhood not known for its residential offerings.

“Everybody is gambling on Brickell City Centre taking the area to nirvana,” says Peter Zalewski, who tracks real estate for CondoVultures, a brokerage. “I’m not sure that’s the case.”

But Brickell City Centre could “recalibrate” residential prices in the neighborhood, Zalewski says. Preconstruction units offered for sale earlier this year were priced at a minimum of $650 per square foot ($7,000 per sq m)—well above the greater downtown area’s median minimum presale price average of $450 per square foot ($4,800 per sq m), he says.

Mass transportation could play a key role in any success scenario. The Metromover, which was launched 28 years ago, links a variety of downtown destinations, including the new waterfront Pérez Art Museum, designed by Herzog & de Meuron, which opened in 2013. The Eighth Street station, which will be absorbed by Brickell City Centre, currently handles an average of only 678 “boarders” on a Saturday (compared with 1,130 a day during the week), according to Miami-Dade Transit.

But several projects may boost downtown’s mass transportation system, including a private rail link between Orlando and Miami known as “All Aboard Florida,” developed by a private company, Florida East Coast Industries, and scheduled to start service within two years.

Planners have also revived a long-discussed light-rail link to Miami Beach. The plan never gained traction in the past, but now the concept has a new, broader level of support with the changing political winds.

“Now we are beginning to connect projects that have never been connected before,” Nostrand says.

Kevin Brass, a Miami-based journalist, regularly writes about global development and design issues for the International New York Times.

]]>http://urbanland.uli.org/development-business/hong-kong-developers-vision-miami/feed/0How Singapore Acquired Control of Four U.S. Resortshttp://urbanland.uli.org/capital-markets/how-the-government-of-singapore-investment-corp-acquired-control-of-four-u-s-resorts/
http://urbanland.uli.org/capital-markets/how-the-government-of-singapore-investment-corp-acquired-control-of-four-u-s-resorts/#commentsFri, 10 Jan 2014 17:01:02 +0000http://urbanland.uli.org/?p=24249Perhaps nothing illustrates the precipitous fall of the U.S. resort sector as the saga that put a quartet of household-name properties under the control of a sovereign wealth fund.

The Arizona Biltmore hotel in Phoenix was awarded the ULI Heritage Award in 1997 for architectural integrity, landscaping, and hiqh-quality service. (Arizona Biltmore)

Perhaps nothing illustrates the lofty peak and precipitous fall of the U.S. destination resort sector as starkly as the long-running, complex saga that ultimately put a quartet of household-name properties under the control of Singapore’s deep-pocketed sovereign wealth fund.

The story culminated earlier last year with Government of Singapore Investment Corp. (GIC) taking control through a $1.5 billion bankruptcy court–administered transaction. Arguably, the story began with a $1 billion “single-borrower” commercial mortgage–backed securities (CMBS) issue when Wall Street’s conduit lenders were gunning full bore in 2006.

The bond deal securitized a senior mortgage against five high-profile resorts totaling nearly 3,300 rooms that were owned by CNL Hotels & Resorts at the time: the 780-room Grand Wailea Resort Hotel and Spa in Hawaii; the 796-room La Quinta Resort and Club and the PGA West golf course in La Quinta, California; the 740-room Arizona Biltmore Resort and Spa in Phoenix; the 692-room Doral Hotel & Country Club in Miami; and the 279-room Claremont Resort & Spa in Berkeley, California.

Then in 2007, as Ashford Hospitality Trust was purchasing more than 50 properties from CNL, it flipped eight resorts—including the five securing the CMBS bonds—to Morgan Stanley’s real estate funds management operation in a $3.1 billion transaction. Morgan Stanley, in turn, sold a $300 million stake in the eight properties to the California State Teachers’ Retirement System.

A couple of years later, as resort revenues were hammered by the Great Recession, the loan was transferred to special servicing as Morgan Stanley sought to modify terms in order to continue servicing the debt under the portfolio’s deteriorated financial picture. However, it was holders of $800 million of subordinate debt who ended up briefly taking control of the five properties subject to the securitized mortgage—after foreclosing on the collateral and converting the debt into equity.

But this group, which included Paulson & Co., Winthrop Realty Trust, and Capital Trust, was not able to hold on, either. In early 2011, it sought protection in the U.S. Bankruptcy Court’s Manhattan district from foreclosure-minded creditors holding another $1.5 billion in secured debt—including the CMBS issue’s trust that still held some $850 million that, by that time, had matured.

To reduce the bankruptcy estate’s liabilities, the court subsequently approved the sale of the Doral resort to a group headed by Donald Trump in a $150 million transaction that closed about a year after the bankruptcy filing.

But it was ultimately Singapore’s GIC, which by then had come to hold some $360 million in subordinate mezzanine debt, that emerged as the owner of the remaining four resorts. The reorganization plan that GIC Real Estate proposed essentially amounted to a court-supervised auction, and entailed having the sovereign wealth fund infuse more than $1.1 billion in additional hard equity to satisfy the CMBS bondholders and other secured creditors.

An improving economy, along with an upswing in convention and tourism business, has spawned a boom in hotel development throughout Chicago’s central business district. More than a dozen new hotels have opened over the past year, are under construction, or are undergoing renovation or expansion.

The downtown market currently has about 34,000 hotel rooms, but Nate Sahn, senior managing director and hotel practice leader for the Los Angeles–based brokerage firm CBRE, estimates that in 2016 when projects under construction and planned are completed, hotel room capacity will increase by 15 to 20 percent.

“I think this recovery is going to be steady and long lasting,” Sahn says. “There’s pent-up demand and a lot of money to be placed, invested.” Investment capital is made up of a mix of domestic and foreign money coming out of Europe, the Mideast, and East Asia, he notes. He cites two examples: a German pension fund that has invested in the new JW Marriot that opened in July in the financial district, and Qatari investors who have purchased 75 percent of the new Radisson Blu, which opened in 2011 as part of a mixed-use project.

Sahn also notes that lenders are offering very attractive financing on development deals, so developers now can afford to pursue more speculative projects.

More than 600 companies moved to Chicago or expanded their operations there in 2012, adding more than 50,000 jobs, according to the city’s annual “World Business Chicago” report. This included an upturn in the manufacturing and high-tech sectors, which significantly increased the flow of business travelers to the city, as well as demand for select-service hotel rooms, notes Greg LaBerge, national director for the Marcus & Millichap brokerage firm’s National Hospitality Group. As opposed to full-service hotels, select- or limited-service hotels provide basic services business travelers require, such as free wi-fi and a business center with computers, printers, and a fax machine.

He cites a turnaround in the auto industry and the emergence of a high-tech incubator in downtown’s Fulton Market–Randolph meatpacking district as primary forces affecting business travel. The authenticity of the old industrial buildings in this northwest downtown district is attracting tech companies, which are repositioning the properties as creative office space—and in the process bringing the district back to life. Google, for example, plans to move its Chicago office into the district’s old Fulton Market Cold Storage building. Previously obsolete industrial buildings also have been converted for use as restaurants and bars.

Hotels are coming to the area, as well. Recently, a joint venture of Chicago-based Shapack Development and AJ Capital Partners began converting an old rubber belt factory into a 40-room SoHo House, a London hotel group brand. In addition, Chicago developer Sterling Bay Cos. is planning a new 150-room hotel on a site adjacent to Google’s new offices, and Chicago developer Mark Hunt has proposed a 12-story, 120-room hotel and Japanese restaurant for New York City–based Nobu Hospitality, which is owned in part by actor Robert De Niro.

A 1,200-room hotel is being added to Chicago’s McCormick Place, the largest conference facility in the Western Hemisphere and now second in business only to facilities in Orlando, Florida. (Choose Chicago)

City Puts Hotel Developer Wheels in Motion

The city’s increase in group and leisure travel business over the past couple of years is the result of changes in the city’s convention and tourism operations—with some help from strategically focused marketing by Choose Chicago, the city’s convention and tourism bureau.

Scheduled to open in 2015, the Loews on North Park Drive, part of a mixed-use project in the affluent Streeterville neighborhood, will have 400 hotel rooms and 398 apartments. (SCB Architects)

Don Welsh, president and chief executive officer of Choose Chicago, credits Mayor Rahm Emanuel for supporting quick implementation of three major changes that restored the city’s competitive advantage as a convention market:

The city’s convention and tourism agencies were collapsed into one new agency, Choose Chicago, responsible for both sectors.

The city’s convention and tourism budget was increased from $13 million in 2011 to $24 million in 2012 and again to $33 million this year. This enabled Choose Chicago to establish ten foreign marketing offices throughout the Americas (Brazil, Mexico, and Canada), Asia (China and Japan), and Europe (United Kingdom, Brussels, and Germany), and launch regional advertising campaigns that targeted leisure tourists living in major cities within a 300-mile (480 km) radius of Chicago.

Labor rules at McCormick Place, the city’s convention center, were relaxed and prices for services were more competitively priced after several major convention clients threatened to take their business elsewhere. Previously, exhibitors were required to use union labor to set up and break down exhibition booths, but now they are allowed to do the work themselves. McCormick Place also began to offer free wi-fi and lowered both prices for the use of utilities by convention participants and the markup on food and beverage service.

As a result of these changes, Chicago moved up three notches over the past year to second place—behind only Orlando, Florida, and passing Las Vegas—on the list of the top 50 U.S. meeting destinations based on event bookings, compiled by Cvent, a meetings management company.

Welsh notes that with the resurgence in the city’s meeting business, the Metropolitan Pier and Exposition Authority, which owns McCormick Place and the 1,260-room Hyatt Regency McCormick Place hotel, has announced plans to add a new 1,200-room hotel and a 10,000-seat multipurpose arena there.

The 1920s art deco Carbide and Carbon Building is now home to the Hard Rock Hotel Chicago. (Hard Rock Hotel chicago)

Also, the number of tourists visiting Chicago rose by 7 million over two years, from 39.2 million in 2010 to 46.2 million in 2012, according to Choose Chicago’s annual “Hotel Performance Report.” Domestic visits rose 11.2 percent, and leisure travel increased by 6 percent, outperforming average national increases in those categories of 6.7 percent and 5.4 percent, respectively.

John Chikow, president and chief executive officer of the Greater North Michigan Avenue Association (GNMAA), a business improvement organization that promotes retailers on the city’s Magnificent Mile along Michigan Avenue, notes that this shopping district is seeing more foreign shopping tourists than ever, which is helping drive hotel development in the area.

GNMAA sponsors two major retail events that attract regional shoppers—the Magnificent Mile Shop Fest, a 12-day event that begins in late August, and the BMO Harris Bank Magnificent Mile Lights Festival, which takes place the weekend before Thanksgiving. Chikow notes that the Lights Festival is the biggest annual event in Chicago, attracting 1.2 million people in 2012. During this event, the area’s hotel occupancy rate typically soars to 98 percent, he says.

Average hotel occupancy this year has climbed back to the 75 percent high watermark set in 2006, even though the number of hotel rooms has increased by 6,000, according to a recent report by CBRE. Visitors pump $12 billion into the city’s economy each year, providing 120,000 jobs and generating $500 million in tax revenue, notes Welsh.

Emanuel and the Choose Chicago board of directors have set a goal of a total of 50 million visitors by 2020, Welsh notes. Attaining this goal would increase total tourism revenue to $15 billion a year, add 15,000 to 25,000 jobs, and more than double the city’s tax receipts from tourism-related businesses to $1.2 billion.

Plethora of New Hotels Rising

The city’s second-tallest building at 96 stories, Trump International Hotel & Tower Chicago, seen here behind the Wrigley Building, is a mixed-use project on the Gold Coast with 339 hotel rooms, 486 condominiums, and 17 floors of retail and office space. (Choose Chicago)

According to Choose Chicago, 1,950 new hotel rooms will come on line this year in the downtown market, and another 2,050 rooms now under construction are expected to be completed by 2015.

About 60 percent of hotel development is in the north Loop/Michigan Avenue area, notes architect Christine Carlyle, a principal and director of planning at Solomon Cordwell Buenz (SCB), an architecture, planning, and interior design firm in the city. This area adjacent to Lake Michigan, known as Chicago’s Gold Coast and home to the Magnificent Mile shopping district, attracts millions of leisure travelers annually thanks to its location.

SCB architect Gary Kohn designed the new Loews mixed-use hotel project on North Park Drive in the north Loop area. Developed by Chicago-based DRW Trading Group and owned and managed by Loews Hotels & Resorts, the project, scheduled to open in 2015, includes a 400-key hotel and 398 luxury apartments. Located in the affluent Streeter­ville neighborhood, the project is part of a large planned development connecting Chicago’s riverfront and lakefront to North Michigan Avenue.

“This is Loews’s first Chicago hotel, and they looked a while for the right site,” says Kohn. The 52-story project’s contemporary, glassy design takes advantage of views of city lights, the Chicago River, and Lake Michigan.

“This is a very walkable neighborhood with lots of restaurants in the area, and there’s shopping and entertainment across the street, including a bowling alley, movie theater, marketplace, and nightclubs,” Kohn adds. The site also is just a ten-minute walk from the downtown shopping district and lake, he notes.

Designed with hopes of garnering a four star–plus hotel rating, the L-shaped tower is organized to provide guests “a gracious arrival,” he says. The structure’s nearly 1 million square feet (93,000 sq m) of space will consist of a four-story hotel podium with ballrooms, meeting space, two restaurants, a bar, and a large terrace for events, topped by 12 stories of sophisticated hotel rooms, and 36 stories with a combination of apartments and amenities.

Residents will have access to hotel room service, concierge service, and housekeeping services, as well as to multiple roof terraces with outdoor bars and cafés, indoor and outdoor pools, and a fitness club, Kohn notes.

Although the project is not pursuing certification under the Leadership in Energy and Environmental Design (LEED) program, he says, “the building is designed for high performance and energy efficiency for both lighting and the HVAC [heating, ventilation, and air conditioning] system, has a green roof, and high-performance tinted glass. We spent a lot of time getting that right.”

Carlyle observes that the Loews project, which places residential units atop a luxury, full-service hotel, signals the return of this concept, which became popular just before the economic downturn. Several other Chicago mixed-use projects built over the past decade in Chicago’s Gold Coast area were based on a similar concept. The 67-story Hyatt Park Tower has 198 hotel guestrooms, 57 stories of condominiums, and 20,000 square feet (1,900 sq m) of retail space. The Waldorf Astoria Chicago (formerly Elysian Hotel & Residences) contains 160 ultra-luxe two-room hotel suites and 27 floors of condominiums. Both projects were designed by Chicago architect Lucien Lagrange. In the same category is the 96-story, five-star Trump International Hotel & Tower Chicago, which has 486 condominiums atop a 339-room hotel and 17 floors of office and retail space.

All three of these projects offer five-star service and amenities, and both the Waldorf Astoria and Trump International Tower introduced the popular Las Vegas condo-hotel concept to Chicago, offering individual condo owners the option of booking hotel guests into their condo-hotel room when they are not using it.

Another recent mixed-use project, the soaring 87-story Aqua Tower, which is part of the 28-acre (11 ha) Lakeshore East master-planned development by Chicago’s Magellan Development, has 745 residential units atop a 334-room Radisson Blu hotel, plus retail and office space. Designed by environmentally conscious Chicago architect Jeanne Gang of Studio/Gang Architects, this thought-provoking, contemporary project received a Silver rating from the LEED program in July.

Opening in November 2011, the four-star Radisson Blu is a $125 million joint venture of Magellan and Minneapolis-based Carlson Hotels, financed by Hartford, Connecticut–based Cornerstone Advisors, investment manager of MassMutual’s equity real estate investments. In 2012, a 75 percent interest in the hotel was sold to Qatari investment firm Al Faisal Holdings, says Robert Kleinschmidt, Carlson executive vice president and chief financial and development officer for the U.S. market.

Carlson chose Chicago to introduce the Radisson Blu brand to the U.S. market, Kleinschmidt notes. “The opportunity to develop a hotel in MacArthur genius Jeanne Gang’s Aqua Tower matched the brand’s commitment to world-class design and sustainable hospitality,” he says. “Chicago’s historic role as a standard-bearer for architecture and innovation made selection of the city all the more easy. Chicago as an incubator of innovation in design was a clear fit.”

Chicago’s large stock of aging, iconic commercial buildings has inspired another hotel development trend: a large number of the city’s historic, architecturally significant landmark office buildings are being converted to conventional or boutique hotels.

Located in the financial district, across the street from the Federal Reserve Bank building, the JW Marriott Chicago opened in July in the Continental & Commercial National Bank Building, designed by acclaimed architect and planner Daniel Burnham.

Lagrange spearheaded the building’s $396 million restoration and conversion of the lower half of the 20-story structure to a 610-key hotel. The upper half of the project, owned by Chicago developer Prime Group and a Germany-based investment syndicate, remains office space.

Lagrange—who also converted a 1910 classical revival Beaux-Arts landmark building designed by Marshall & Fox to the Blackstone Hotel, and the 1920s art deco Carbide & Carbon Building to the Hard Rock Hotel Chicago—says old office buildings make ideal hotels because they typically have big floor plates, large rooms, tall ceilings, and architecturally unique details. He also notes that conversion projects can be completed faster—within 12 to 14 months—than new, ground-up construction, saving time and money.

“As a building, the Continental & Commercial National Bank Building, works perfectly for a hotel, and everything fell into place,” says Lagrange. The building had a large, 9,000-square-foot (836 sq m) hall suitable for a ballroom, and the hall’s ceiling had a height of 100 feet (30.5 m), he notes, which provided enough space to create another level for a junior ballroom and still have a 40-foot (12 m) ceiling.

The ground-level floor plate was spacious enough to accommodate a lobby, the kitchen, and retail services. Also, individual offices had two windows per room and a basic room size 16 feet (4.9 m) deep, which Lagrange says is ideal for a Marriott guestroom.

Advantages of Repositioning

The lavishly restored 14-story Hotel Burnham, one of four boutique hotels in Chicago operated by Kimpton Hotels, occupies one of the city’s first skyscapers, the 1894 Reliance Building. (Kimpton Hotels)

“Taking a building that doesn’t work anymore as an office building and turning it into a hotel creates value,” Lagrange emphasizes. “You could spend millions renovating it for use as an office building, but you will still have an obsolete office building. The conversion saves the building, and gives it a new financial life,” perhaps extending its use for another 100 years, he says.

“And because this is a perfect use for this building [the Continental & Commercial National Bank Building], the conversion changes the life of the street,” adding a hotel, restaurant, and bar to a street that previously was void of amenities, Lagrange says.

John Rutledge, founder and president/chief executive officer of Chicago-based Oxford Capital Group, which has completed ten hotel conversion projects, points out that old office buildings usually have good locations in the city’s core. They also have good “bones” and are architecturally beautiful structures with striking detailing, he says. “These are art gems with classic visual appeal. You can’t justify replicating this in a modern building.”

From a financial perspective, old commercial buildings can be repositioned at a significant discount, Rutledge says—well below replacement cost or the cost of new construction. “Frequently they are local and national landmarks, so [they] get historic tax credits,” he notes.

The project also may qualify for city tax incentives if it is in a tax-incentive financing district or repositions an empty office building. His company recently developed the swanky 316-key Langham Hotel Chicago, located at 330 North Wabash Avenue in the north Loop/River North area, which opened in July on the first 13 floors of the IBM Building. Designed by Ludwig Mies van der Rohe, this 52-story tower—which the Chicago Tribune called a “starkly rectilinear monolith” of anodized aluminum and bronze-tinted glass—transformed the city’s skyline when it opened in 1972.

Dirk Lohan—Mies’s grandson, cofounder of Chicago architectural firm Lohan Anderson, and designer of the Langham’s ground-floor lobby and ballroom—says that in the 1970s the building represented a “pioneering jump north of the river, as that area was underdeveloped at the time.” He also notes that the building’s midcentury modernist architecture gives it high visibility on the street. “There’s a generosity in this building you don’t get in newer buildings,” he adds. For instance, the 15-foot (4.6 m) depth of the former offices provided space for spacious guestrooms with very large baths.

The Hotel Burnham’s Reliance Room. (Kimpton Hotels)

Oxford Capital also recently teamed up with Angelo, Gordon & Co., a privately held investment advisory firm based in New York City, to purchase the London Accident and Guarantee Building, a 22-story landmark on Michigan Avenue with classical architecture that was built in the 1920s. Oxford Capital plans to convert this building to a hotel, too, as part of a transformation project to connect a stretch of Michigan Avenue near Millennium Park to the Magnificent Mile shopping district north of the Chicago River.

U.K.-based Virgin Hotels has also chosen a Chicago landmark, the Old Dearborn Bank Building, to house its first hotel in the United States. Designed by Chicago architects and brothers Cornelius W. and George Leslie Rapp and completed in 1928, this 27-story art deco building at 230 North Wabash Avenue was among the first office towers built north of the river. The hotel will have six food and beverage venues and a world-class spa.

Customers of Richard Branson’s Virgin Atlantic and Virgin America airlines will help fill this boutique hotel’s 250 guestrooms, suggests Doug Carrillo, vice president of sales and marketing for Virgin Hotels, North America. “We feel that this offering will play to our loyal Virgin customers,” he says.

Building Midmarket Capacity

The Public Chicago’s design may represent the future select-service hotel model, offering services and amenities that attract a specific type of guest. This hotel appeals to gen-Y guests, offering various places to linger and socialize. (Public Hotels)

New York City hotel mogul Ian Schrager’s new 235-room Public Chicago, which opened in 2011, is an example of both the financial benefits of repositioning historic buildings and of how boutique hotels are meeting growing demand for competitively priced accommodations with services that meet the needs of both business travelers and budget-conscious tourists.

Backed by Morgan Stanley, Schrager paid $25 million for the Ambassador East Hotel, a 1926 landmark, and invested $35 million redesigning and renovating it to boutique standards.

In a December 2011 interview with Travel & Leisure magazine, Schrager noted that his no-frills hotel, with rooms rates starting at $140 a night, offers an alternative to pricey accommodations. “There’s a paradigm shift in this country,” he says. “People want to be more modest. Even if they have the money, they don’t want to spend it extravagantly anymore.” His aim is to provide guests a memorable experience without the unnecessary luxury services that most people neither need nor use.

He compares his hotel to a Hilton Garden Inn or Marriott Courtyard combined with the service of a Four Seasons. But unlike chain hotels, the Public Chicago is a slick, hip, unique project programmed to appeal to gen-Y guests. It offers various places to linger and socialize, including a lobby that doubles as a community office with a huge Christian Liaigre table occupied by five MacBook Pro computers. There also is an in-house restaurant/bar, a coffee bar, and a fitness center.

Similarly, Kimpton’s four Chicago projects are boutique hotels that appeal to certain guest types. All are pet friendly and LEED certified. With the exception of the Hotel Palomar, which is a contemporary structure, the Kimpton hotels occupy landmark buildings and offer guests a unique, historic experience. The chain’s Hotel Burnham and Hotel Monaco also are part of Retrofit Chicago’s Commercial Buildings Initiative, the city’s sustainability program, which requires a reduction in energy use of at least 20 percent from 2010 levels.

Kimpton’s Hotel Allegro is housed in the original Bismarck Hotel, which opened in 1894 in the heart of the Chicago theater and business districts. Countless artists, entertainers, politicians, and celebrities have stayed in the building over the past century. (Kimpton Hotels)

Constructed in 1895 by legendary Chicago architects Daniel Burnham and John Root, the 14-story, 122-room, select-service Hotel Burnham, located at the corner of State and Washington streets in the north Loop area, was one of the world’s first steel-frame skyscrapers and at the time was one of Chicago’s tallest buildings.

Kimpton’s 483-room, full-service Hotel Allegro, developed in 1894 as the Bismarck Hotel by German brothers Emil and Karl Eitel, is located at the heart of the theater and business districts and has hosted countless artists, entertainers, politicians, and celebrities over the past century.

And the select-service, 181-room Hotel Monaco restored the headquarters of the old D.B. Fisk Company, a hat maker, with an eye to preserving this steel-framed, brick-masonry building’s charming, terra-cotta decorative elements that make it both historic and unique.

Chicago’s Hotel Future

“The hotel space is an exciting place to be right now,” says LaBerge of Marcus & Millichap. “Arguably, hotels provide one of the fastest-growing, most attractive yields.” But he notes that there is an on­going argument about whether big, full-service hotels will be built in the future. “They’re difficult to build and not as profitable versus select service,” he says. Also, boutique hotels fit the select-service model and now constitute a national trend, he notes.

“This makes sense,” LaBerge continues. “There’s greater demand for a Hilton Garden than a full-service Hilton.” However, the select-service model of the future may look more like the Public Chicago, he says.

Noting that revenue per available room is improving, Sahn of CBRE points out that groups are buying up old buildings to convert to hotels because the midmarket is underserved. “They feel that if they come in with the right management, they can penetrate this market in a positive way,” he says.

And despite the number of large luxury hotels coming on line or under construction, Sahn agrees that the future of this product type is uncertain. “Unlike coastal markets, Chicago is a Midwest city and will never be a $300- to $400-per-night market,” he says.” It will be interesting to see what the Chicago hotel market looks like five years in the future.”

]]>http://urbanland.uli.org/industry-sectors/hotels/checking-in-chicagos-hotel-resurgence/feed/1A 1987 ULI Panel Helped Lay the Foundation for the Colorado Convention Centerhttp://urbanland.uli.org/planning-design/a-1987-uli-panel-helped-lay-the-foundation-for-the-colorado-convention-center/
http://urbanland.uli.org/planning-design/a-1987-uli-panel-helped-lay-the-foundation-for-the-colorado-convention-center/#commentsThu, 25 Oct 2012 15:01:00 +0000http://urbanland.uli.org/news/a-1987-uli-panel-helped-lay-the-foundation-for-the-colorado-convention-center/The Colorado Convention Center is one of the country’s busiest meeting venues.
The work of a ULI Advisory Services panel played a significant role in Denver's decision to build the convention center. But it had a humble and fractious start.

]]>The Colorado Convention Center on 14th Street in downtown Denver is one of the country’s busiest meeting venues, hosting more than 400 events annually—more than one a day. The facility’s 2.2 million square feet (204,000 sq m) of meeting and exhibition space includes 584,000 square feet (54,000 sq m) of exhibit space on one level, six individual halls, outdoor terraces, and a 5,000-seat theater.

The work of a ULI Advisory Services panel played a significant role in Denver’s decision to build the convention center, and also laid the groundwork that guided its growth and success as a major economic engine for the city. But it had a humble and fractious start.

In the late 1970s, leaders of the Mile High City noticed the convention, exhibition, and meeting industry experiencing phenomenal growth, but due to the physical limitations of Denver’s existing facilities, the city was missing out convention business. When former Denver Mayor Federico Peña ran for the office in 1983, his campaign slogan was “Imagine a Great City.” One of the cornerstones of his platform, in addition to building a new airport, was to build a new convention center. After the election, Peña appointed a committee to study whether Currigan Exhibition Hall could be expanded. For the next four years, committees and task forces weighed in, and finally the city decided it needed a new convention center.

The state government supported this business development move and passed House Bill 1382, which promised financial assistance and authorized a ULI Advisory Services panel to recommend a convention center site from among five proposals received in July 1987. Governor Roy Romer threw his support behind the concept of the ULI panel to provide an objective, outside view of the convention center’s location.

The ULI panel reviewed the proposals and made recommendations concerning site, location, design, access, financing, operation, and management to the Selection Criteria Committee. The recommendation: a new convention center to be built at the Silver Triangle site, the most centrally located, pedestrian-oriented site near the heart of downtown among those being considered, as proposed by Baltimore-based real estate developer French and Company.

The selection was controversial, with the Rocky Mountain News running a story under the headline “Dark-horse pick stuns city officials.”

“The decision drew gasps of surprise from an audience, including Gov. Roy Romer and Mayor Federico Peña, gathered to hear the verdict,” reported the Denver Post, which also quoted council member Cathy Donohue: “I’m in such shock, I don’t know what to do.” City officials had favored another site outside the central business district and had negotiated with the developer of that property for more than a year.

The ULI panel’s reasons for supporting the Silver Triangle site now constitute a list of “missions accomplished” for the city.

In presenting its findings to a packed meeting of the City Council, the panel presented a strong case that the proposal would both enhance urban quality of life and have a positive impact on the surrounding neighborhood, which at that time was a blighted area of mostly empty lots and flop houses.

The ULI panelists said building the Colorado Convention Center at the Silver Triangle would provide multiple benefits, such as reinforcing and rejuvenating the central business district, and take full advantage of existing and planned urban amenities such as light rail and the 16th Street pedestrian mall. The site also was close to downtown hotels and within walking distance or a quick shuttle ride of numerous attractions, such as the Denver Art Museum, the Colorado State Museum, and the Tivoli mixed-use project.

A free shuttle serving the 16th Street Mall corridor and the convention center would be located just off the center point of that retail/entertainment spine. The panel believed that placing the convention center near the midpoint would provide an important boost of vitality to bridge the distance between city hall and the civic center at one end and the popular Larimer Square complex at the other. Having spent several days in the field reviewing sites, the ULI panel concluded that these and other amenities attractive to convention-goers would all be accessible within a five- or ten-minute walk of the proposed site.

The new facility opened in June 1990. Its opening act: the NBA draft for the Denver Nuggets.

The convention center has been an economic powerhouse for the city, leading to a $340 million major expansion that was completed in December 2004. The expansion doubled the size of the facility to the current 584,000 square feet (54,300 sq m) of exhibit space, 100,000 square feet (9,300 sq m) of meeting rooms, and 85,000 square feet (7,900 sq m) of ballroom space. The expansion also included the 5,000-seat Wells Fargo Theatre, which has hosted performers as varied as Bruce Springsteen and comedian Jamie Foxx.

The expansion also led Hyatt Hotel Corporation to build the 38-story Hyatt Regency Denver next to the convention center. The number of hotel rooms in the area more than doubled to 8,400 from 4,100. In addition, at least two dozen outdoor cafés and numerous shops are within a mile of the convention center.

To accommodate the expansion, the old Currigan Exhibition Hall and a nearby office tower were demolished, and Stout Street and the light-rail tracks were rerouted to curve through the facility.

The expanded convention center allows the city to host all but the largest 5 percent of gatherings, keeping Denver competitive in the convention business. The Colorado Convention Center also has spurred substantial private sector investment in the area and, along with investments made next door at the Denver Performing Arts Complex, has greatly contributed to the overall revitalization of downtown Denver. With its integration of public art and architecture, the expanded convention center strikes a balance between functionality and aesthetics, meeting the needs of conventioneers and the community while adding a striking new image to the Denver skyline, says Rich Grant, communications director for visitdenver.com, the city’s convention and visitor bureau.

The Colorado Convention Center hosted 82 national groups in 2011, made up of 264,497 delegates who spent $526.9 million in the city. In addition to those large events, the center has welcomed hundreds of thousands of people at local events, such as auto and garden shows. ULI has held several meetings there. Tourism is the second-largest industry in Denver, supporting 50,000 jobs and generating $3.3 billion in spending each year, Grant reports.

]]>http://urbanland.uli.org/planning-design/a-1987-uli-panel-helped-lay-the-foundation-for-the-colorado-convention-center/feed/0Opportunities and Risk Return to Asian Marketshttp://urbanland.uli.org/fall-meeting/opportunities-and-risk-return-to-asian-markets/
http://urbanland.uli.org/fall-meeting/opportunities-and-risk-return-to-asian-markets/#commentsFri, 19 Oct 2012 15:35:00 +0000http://urbanland.uli.org/news/opportunities-and-risk-return-to-asian-markets/Risk, other than literally, is not a four-letter word when investing in Asia real estate. Risk is a fact-of-life that needs to be constantly assessed on the ground, a trio of experts said at a session on Asia real estate capital markets.

Pricing was wrong when too much capital was chasing too few properties, while opportunities abound today for those with an appetite for risk.

Boots on the ground are needed in assessing opportunity in Asia.

Evaluate countries in Asia like you would a company’s balance sheet, but a bottom-up analysis is also needed.

Risk, other than literally, is not a four-letter word when investing in Asia real estate.

Risk is a fact-of-life that needs to be constantly assessed on the ground by a staff that is taking the pulse of market conditions, whether during the boom of a few years ago, or more recently, as a pullback in emerging markets is taking place, a trio of experts told a session on Asia real estate capital markets on Thursday, Oct. 18, at the Urban Land Institute’s fall meeting in Denver.

The first question asked by moderator Brandon Sedloff, the managing director for the Asia Pacific region for ULI, regarded risk. The theme seldom wandered from risk during the 75-minute session.

Richard Price, Chief Executive Officer for CBRE’s Global Investor’s Asia investment management business, said that “risk pricing” was wrong when too much institutional capital was chasing too few properties in Asia a few years ago, and “risk pricing is wrong again,” now that bubble conditions are being feared.

In general, he said institutional investors are very risk-adverse. “But for those who have an appetite for risk, there are real opportunities” in Asian real estate, he said.

“It’s a challenging environment today,” Price continued, but added that Asia is in much better shape to weather shocks to the system than it did in 1997 and 1998, when it also suffered from a pullback when the market became overheated.

“There is a real risk. And investors have to understand they are taking a real risk,” said panel member Paige Mueller, Director of Institutional Real Estate Advisory Services at RCLCO, who is based in Los Angeles. She is also a former senior vice president with GIC Real Estate.

Getting a handle on risk before institutional money is invested in real estate involves looking at an Asian country in the same way you would look at a company’s balance sheet, she said.

Questions that need to be asked include:

Where does a country get its revenues?

How much of that is coming from the black market?

How stable is the government?

What are the country’s policies and practices regarding things such as property rights and contracts?

Once a comfort level is reached with investing, “you look at the underlying real estate risk, just like you would in the U.S. and were investing in an office building in Dallas.”

At the same time, a bottom-up approach is needed in evaluating specific properties and opportunities in Asia, she said. “That is a quandary,” for institutional investors that do not have staffs in Asia, she said.

Price agreed, who has a staff of more than 100 people throughout Asia. Local knowledge is key when putting together deals with local partners, he said. Years ago, he noted that he put together a joint venture deal where his group controlled 95 percent of it, and thought his group was in control. He found that not to be the case, as the local investors with a very small minority percentage actually called the shots.

“Sometimes you think you are in control when you are not,” he said. Today, he said he realizes how important it is to pick the right partners in Asia, something that can only be done if you have knowledgeable staff on the ground.

Another panel member, Chetan K. Dave, is managing partner and CEO of the Real Estate Group at Infrastructure Development Finance. Chetan is based in Singapore, but focuses on India.

He noted that while he looks Indian, he found himself at a disadvantage when India first opened up its market to foreign investments, because virtually his entire work history had been in the U.S.

India had prohibited outside investments in nuclear power, agriculture and real estate, he said. “Why real estate was in the same company with nuclear energy, I do not know,” he said.

Still, because it is such a young market as far as allowing outside capital investments, it is a tiny fraction of the size of real estate investment markets in Asia, Europe or the U.S., he said.

Despite the huge number of people in India and its giant land mass, “India is much smaller than other markets,” Dave said. “That is relevant because a small market can become over-heated very quickly.”

That is what happened when India opened its real estate market in the mid-2000s, he said.

Indeed, investors paid such premiums for agricultural land that it made many farmers millionaires, he said.

“That is a permanent shift,” Dave said, noting that land prices may have softened from the peak, they will never return to previous lows.

While the red tape in India is legendary, he said it is also important to put it in perspective. “It takes a lot of time to get approval for zoning in and around Napa Valley in California,” Dave said. “It can take four years to get a zoning change in Napa Valley and it will cost you a fortune. It’s not just in Mumbai.”

Risk is not going to go away in Asia, but it also can’t be assessed from thousands of miles away, Price of CBRE said.

“Assessing risk is much more of an art than a science,” he said. “You need to get down to it a very granular level. My final point on risk is that is being mispriced. For capital willing to take on risk, there are some real opportunities.”

]]>http://urbanland.uli.org/fall-meeting/opportunities-and-risk-return-to-asian-markets/feed/0Vail After the Low-Snow Winterhttp://urbanland.uli.org/industry-sectors/vail-after-the-low-snow-winter/
http://urbanland.uli.org/industry-sectors/vail-after-the-low-snow-winter/#commentsWed, 10 Oct 2012 11:14:00 +0000http://urbanland.uli.org/news/vail-after-the-low-snow-winter/How do you guide the resort and real estate businesses through an erratic economy—and the fickle whims of Mother Nature?

]]>Rod Slifer has a half century’s worth of Vail memories. “I came to Vail from Aspen, where I was a ski bum,” Slifer said this summer during an address to real estate editors gathered at Vail. “When I wasn’t skiing or teaching skiing, I was waiting tables or painting houses. It was the summer of 1962, and there was nothing here.”

But he and his partners had grand ideas about what could go there: they wanted to build a ski slope on the mountain, about 100 miles (160 km) west of Denver. Vail, with more than 5,200 acres (1,700 ha) of terrain, now is the largest ski resort in the United States in terms of skiable area, according to mountainvertical.com. The resort’s pioneers had to start from scratch. “We’d get out there on the mountain and remove dead trees ourselves,” Slifer said. He noted that the town did not even have a planning commission at the time.

But there is one memory from those 50 years that Slifer might like to jettison: snowfall during the 2011–2012 ski season was the worst he could recall. “We are in business with Mother Nature,” Slifer said. “We had a good year in Vail, despite the lack of snow. But I would hate for this to become the norm.”

Abundant snowfall during the previous season had shattered records, so it is too early to predict that a snow drought will plague the mountains in Colorado and elsewhere this season the way the rainfall drought swept much of the nation during the summer.

And snow is only one contributor to the real estate and resort businesses in the mountains, says Harry Frampton. Frampton, ULI chairman from 2003 to 2005, is the past president of Vail Associates (now Vail Resorts), the developer of Vail and nearby Beaver Creek. Frampton is chairman of the nonprofit Vail Foundation and a partner with Slifer at their namesake firm, Slifer Smith & Frampton Real Estate, a leading real estate brokerage company in the Vail area, as well as in nearby resorts in Summit County, such as Breckenridge, Keystone, and Copper Mountain.

“When I look at the lack of snow last season, what I really think is that we saw a drop in Front Range skiers from the Denver area, but not such a big drop from the destination skiers,” Frampton says. “People come to Vail from all over the country and all over the world. Those people still came here and ate at the restaurants, shopped in the boutiques, and visited the spas. It was the local market that backed off. When we live in the mountains or live in Denver, we get really picky. We like to ski in powder, not on the rocky stuff. Furthermore, Vail Resorts has invested a lot of money in cutting-edge snowmaking equipment during the past four or five years, so the skiing, especially in the back bowls, wasn’t as bad as many might think.”

Hospitality and Real Estate

Solaris Residences has some of the highest-priced real estate
in the heart of Vail.

When talking about mountain resorts, it is important for people to distinguish between the resort/hospitality business and real estate, Frampton says.

“Those are two different things,” he says. “In 2009 and 2010, the real estate business was kind of bad here, as it was in most, if not all, resorts. But the resort business has been performing quite well in recent years. I think that Vail escaped the worst of it because it did not have the excessive overbuilding you found in some other places. Yes, we did have our share of bankruptcies and foreclosures. That happens in every recession. Some people had to sell at a loss for financial reasons, and banks took over other properties. That is always going to happen. It is part of the cycle.”

In the first six months of 2012, buyers paid $662.7 million for residential and commercial real estate and land in Eagle County, with $607 million of that accounted for by residential transactions. The sales total is about 12 percent more than the $589.1 million buyers paid for all real estate in the first half of 2011, according to an analysis by Denver-based Land Title Guarantee Co. Sales volume for all real estate in the first half of 2012 was 57 percent above the low for half-year sales reached during the real estate crash of 2009. However, this year’s first-half figure is still a far cry from that in 2008, when buyers paid more than $1 billion for real estate in just the first half of the year, according to Land Title.

Sales tax revenues in Vail in 2011 actually grew by 11 percent from 2010, and new inventory from projects such as the Solaris high-end condominium project and a Four Seasons hotel and fractional resort development helped boost property tax revenues, even though values for existing properties decreased by 32 percent, according to projected 2012 collections by the Eagle County Assessor’s office, which covers Vail.

Whereas the multimillion-dollar home sales are the ones that grab the headlines, sales are strongest at much lower price points, says Bob Rulon, vice president at Land Title. “Homes priced at $350,000 and under are getting rapidly absorbed,” he says. “That is kind of where the action is.”

Pitkin County, which includes Aspen, is not recovering at such a fast clip. Real estate sales in Pitkin in the first half of the year were $593 million, down 16 percent from the first half of 2011 and a fraction of the record $1.4 billion in sales logged during the first half of 2007, according to Land Title.

Sales volume is down, despite hedge-fund billionaire John Paulson’s $49 million purchase in June of Saudi Prince Bandar bin Sultan’s sprawling estate in the Starwood Ranch neighborhood of Aspen. That sale, likely to be one of the largest in the country this year, is still far below the $135 million the kingdom’s former ambassador to the United States initially was asking for his Hala Ranch when he placed it on the market in 2006. Following the purchase, Paulson’s office released a statement noting that the purchase price “represents a substantial discount to the asking price,” and includes 38 separate acres (16 ha) that had never been on the market before.

Despite the rocky real estate market, Vail Resorts, which trades under the symbol MTN on the New York Stock Exchange and has a market cap of almost $2 billion, is holding its own. “Despite unprecedented snow conditions during the 2011–2012 season, Vail Resorts delivered an approximate 1 percent increase in ‘mountain reported’ EBITDA [earnings before interest, tax, depreciation, and amortization] in the third quarter compared with the prior year,” says Alex Iskenderian, chief operating officer for Vail Resorts.

“The 2011–2012 season was the most challenging winter as it relates to snowfall that most of us can recall, but as a company Vail Resorts was able to deliver a solid financial performance in less-than-favorable conditions,” he says. “This performance demonstrates the stability and resiliency of our business model, which benefited from our growing season-pass business, as well as the quality of our resorts and the breadth of the experience we offer, which attracted guests throughout the season.”

He shares Frampton’s take on the role of snowfall. “Of course snow is important to Vail,” he says. “However, Vail Resorts has invested in state-of-the-art, efficient snowmaking and grooming capabilities which help ensure we’re offering our guests the highest-quality snow surfaces and the most amount of trails open as possible. Our resorts also offer many other world-class activities and events that make up a world-class vacation experience—even for guests who may not ski or snowboard—including great après-ski and dining, spas and shopping, ice skating, cross-country skiing, snow tubing, and much more.”

He notes that Vail also managed to weather the bursting of the real estate bubble. “Vail came through the worst economic downturn in most of our memories with four spectacular, brand new property developments or redevelopments,” Iskenderian says. Those projects are the following:

Ritz-Carlton Residences of Vail, which has 71 condo units priced from $2.46 million to $8.98 million;

Four Seasons Resorts & Residences Vail, which has 121 guest rooms in a contemporary alpine lodge–style building, plus two additional components—Club Vail and Private Residences, nine fractional residences sold in one-12th deeded interests ranging in price from $303,000 to $534,000 per fraction, and the Four Seasons Private Residences Vail, with 16 condominium units ranging in price from $2.7 million to $14.5 million;

Solaris Residence, which has some of the most expensive real estate in the heart of Vail—79 units priced at $1.45 million to $19 million; and

the Sebastian, a 100-room/seven-suite hotel and 36-unit private residence club, with resort memberships starting at $225,000 for four weeks and club memberships starting at $395,000 for eight weeks.

“Vail went through a renaissance that started prior to the downturn,” he adds. “Whereas at so many other resorts development and construction were halted in the midst of the downturn, Vail saw a tremendous renewal during this period with new lodging, new restaurants, public amenities, shops, and more.”

Focusing on Sustainability

Vail Resorts strives to make sure it is operating and growing in a green manner, says Iskenderian. “Our success as a company is intimately connected to the environment,” he says. “We regularly set the standard for responsible design and construction, including utilizing recycled construction materials, regional products, and energy-efficient and water-saving features.”

The Sebastian is a hotel and private residence club.

For example, its One Ski Hill Place, Breckenridge’s first RockResort (a luxury hotel chain owned by Vail Resorts), was recognized as one of Colorado’s most environmentally friendly properties. The ski-in, ski-out property at the base of Breckenridge’s Peak 8 was certified as the town’s first Green Globes–built property and Colorado’s highest Green Globes–rated development. Green Globes is an independent program similar to the Leadership in Energy and Environmental Design (LEED) rating system created by the U.S. Green Building Council. Green Globes rates and certifies properties according to environmental attributes and sustainability on a scale that ranges from one to four in the categories of energy, indoor environment, site, water, resources, emissions, and project/environmental management.

During the past three years, Vail Resorts has cut its energy use by 10 percent, the company reported in March, the equivalent of the annual energy used by 1,400 average U.S. homes, and cut carbon dioxide emissions by 22,801 metric tons.

“But perhaps no place will more clearly represent our sustainable building philosophy than the proposed Ever Vail mixed-use project in West Lionshead,” says Iskenderian. That project will involve the redevelopment of a nearly 13-acre (5.3 ha) site now occupied by an aging maintenance facility, office buildings, and a former gas station. First proposed in 2007, the master plan has been scaled back and accepted by the town and is now going through the approval process. Construction, which will start when the economy is stronger and the existing inventory in Vail is sold, a Vail spokeswoman says, is expected to take place in phases over eight to 15 years.

The master plan for Ever Vail achieved a Platinum rating in the LEED for Neighborhood (LEED-ND) program, having completed final stage-one LEED-ND review, making it the first project in the Colorado Rocky Mountain region to achieve that designation, Iskenderian says.

Workforce Housing

With residential real estate that now can command close to $3,000 per square foot ($32,000 per sq m), the community struggles to provide affordable housing for seasonal workers, teachers, firefighters, police officers, and others working in service industries. About 36 percent of Vail’s population is composed of full-time residents.

“There is a difference between affordable housing and workforce housing,” Iskenderian says. “High-end resort communities such as the town of Vail do struggle with the idea of creating affordable, for-sale housing for year-round residents [given] such high property values.”

Denver-based Corum Real Estate Group has built more affordable rental housing in Colorado mountain communities than any other company. It owns some of its projects and has sold others, but it typically continues to manage properties after a sale.

“I think land is certainly an issue,” says Jamie Fitzpatrick, a partner of Corum Real Estate. “Land values do not support that kind of use. But the bigger issue is capital and attracting capital to the market. Going back to our first deal in 1993, we had a great site, a great plan, and costs were in line, but we couldn’t get financing. Institutional investors like insurance companies couldn’t get comfortable with it because they didn’t see an exit strategy. Where were the ten guys who would want to buy the property in an urban core in the mountains when it was time to sell? That limits your capital sources.”

The solution includes public/private partnerships, tax-credit financing, and working closely with mountain operators such as Vail Resorts and the Aspen Skiing Co., says Fitzpatrick.

International Influences

Because Vail draws visitors from around the world, operators there must be in tune with demographic trends and cultural preferences. Vail has long been a popular holiday destination for the well-heeled of Mexico, which has helped revive one of Vail’s prominent developments, the Sebastian.

The Sebastian opened as the Vail Plaza Club in 2007, near the peak of the market, but fell into bankruptcy. It was bought by Mexican investors and opened as the Sebastian in January 2011 as a 100-room/seven-suite hotel and 36-unit private residence club. Resort memberships start at $225,000 for four weeks, and at $395,000 for eight weeks.

“It was first built by a South American gentleman who put over $100 million into it,” says David Burden, CEO of Timbers Resorts, based in Carbondale, near Aspen. “It was extremely well built and had a stellar location, but the design and presentation were already dated when it opened”—by 20 or 30 years, he says. It has been completely revamped, with a new lobby and bar. With the infusion of cash from the Mexican investors, it has no debt, and sales of fractional memberships have been brisk, Burden says.

Denver-based Inspirato, a luxury home destination club, has hundreds of multi­million-dollar homes available worldwide for members, including homes in all the major mountain resorts of Colorado. It also has units in luxury hotels, such as Solaris in Vail. Each resort has its own personality and tends to attract a different clientele, says Brian Corbett, chief experience officer for Inspirato.

Vail is popular with Front Range members and big-city dwellers, he says. “They feel very comfortable letting their older kids roam free in the village. It is also very popular with our Mexican members and people from Latin America.” Beaver Creek, owned by Vail Resorts and located 12 miles (19 km) west of Vail, is a little more family oriented, he says, as is Snowmass, near Aspen.

Aspen is popular among members from Los Angeles and New York City “who like that celebrity scene and the jet-set crowd,” says Corbett. Steamboat Springs is popular with midwesterners and is easy to get to from places like Chicago because of direct flights to and from nearby Hayden/Yampa Valley Regional Airport.

Texans tend to like Telluride, as do others who like the steep slopes. “Telluride has that reputation for steep slopes, the same as Jackson Hole in Wyoming, although the truth is they both have plenty of runs for beginning and intermediate skiers, too,” Corbett says.

A Forest Service Partnership

Vail Resorts in late July unveiled Epic Discovery, a plan that will take advantage of the federal Ski Area Recreational Opportunity Enhancement Act, approved in November 2011, which allows more year-round activity on U.S. Forest Service (USFS) land, subject to USFS review and approval. Most ski resorts lease USFS land.

Plans for Epic Discovery include developing amenities such as zip-line tours through the mountains, creation of a raised alpine slide on rails that wind down the mountain following the contours of the land, and establishment of an education center. Vail Resorts will pay for the amenities and fund the infrastructure costs on USFS land that it leases. Construction on some phases could begin as early as this fall, a company spokeswoman said, and completion is expected to take 12 to 18 months. The proposed activities will use much of Vail Mountain’s front side as well as portions of the Game Creek Bowl area on the opposite side, she said.

Vail Resorts, in turn, has formed a partnership with the Nature Conservancy under which it will contribute 1 percent of all revenues from the new summer activities—alpine slides to zip lines—to the nonprofit conservation group.

Iskenderian says his company is looking forward to providing these new amenities to guests, which will help educate them about the area’s natural surroundings—and support forest restoration projects.

“Also, removing some of the seasonality of the guest experience in Vail will create a stable year-round model not only for visitors, but also for local economies, and utilize existing infrastructures more consistently throughout the year,” he says.

]]>http://urbanland.uli.org/industry-sectors/vail-after-the-low-snow-winter/feed/0Development Strategies for a New Era of Health Carehttp://urbanland.uli.org/planning-design/development-strategies-for-a-new-era-of-health-care/
http://urbanland.uli.org/planning-design/development-strategies-for-a-new-era-of-health-care/#commentsWed, 01 Aug 2012 13:57:00 +0000http://urbanland.uli.org/news/development-strategies-for-a-new-era-of-health-care/As providers seek to bring care closer to the community, health care campuses may come to include hotels, retail, research facilities, and more.

]]>Even as they are under pressure to reduce the cost of delivering care, executives at health care systems and hospitals across the country are dealing with the effects of health care reform, market dynamics, community needs, and trends aimed at improving quality. Regardless of the outcome of the U.S. Supreme Court’s ruling on President Obama’s Affordable Care Act, expected in June, health care organizations face a crisis of not being able to provide care affordably within the existing model.

The need to change has generated a growing list of critical concerns that must be addressed as health care providers determine what type of facilities to develop—and where to place them—in order to be competitive and meet increasing demand for care. While the push for operational efficiencies is clearly driving decisions, market-smart leaders also understand that the very concept of health care is being redefined.

In the redistribution of care, some services are beginning to move away from the central health care campuses. Over time, this migration will open up new possibilities for health care centers, creating space for other uses, including residential, hospitality, and retail, that will attract interest from developers and reshape medical districts.

If one looks at the current configuration of many medical centers—dense, often urban, and frequently constrained clusters of health care facilities—while listening to the longer-term plans of health care systems for more dispersed networks of facilities and programs embedded in communities, it is possible to envision a different future for health care campuses. As outpatient services and medical office buildings move away from inpatient-focused campuses to be closer to patients in neighborhood centers and suburban locations, as payment structures for health care change, and as the focus on wellness intensifies, will health care campuses evolve into health care communities?

In California, so often the bellwether state for change, several of the region’s leading health care institutions are developing buildings capable of providing more sophisticated care in less square footage. They are devising entire new models that deploy real estate and facilities differently to support healing and wellness. They are rethinking everything from acute-care facilities to neighborhood clinics, aligning their businesses and facilities not only to meet the exigencies of health care reform, but also to create a more sustainable delivery model.

On-Site Research Facilities

The new Cedars-Sinai Advanced Health Sciences Pavilion
will be a flexible physical environment that colocates teaching,
research, and clinical care to create a synergistic
model focused on the patient.

Clinical research is a critical component of the emerging model. Instead of researchers working off site in sequestered laboratories, they are brought onto the hospital campus, close to clinicians and patients. Today’s researchers often are also clinicians and educators whose work brings multiple medical disciplines together with patients and requires facilities that benefit all users. For example, at Cedars-Sinai Medical Center in Los Angeles, the new $350 million Advanced Health Sciences Pavilion (AHSP), scheduled to open in 2013, will place outpatient care, medical and scientific research, and graduate and professional education all in one place on a compact site on the 24-acre (9.7 ha) urban campus.

“In 2007, we were at the end of a long-term master plan, and this was one of our last available open sites,” says Robert Cull, executive project director of facilities planning, design, and construction for Cedars-Sinai Health System. “We had completed a new intensive-care bed tower in 2005 and had begun planning an outpatient facility for the site. Revisiting the strategic and facility master plan in 2007, we saw a growing need for additional research space to support our growth as an academic medical center and decided to add the research labs into the outpatient facility.” Adding two floors of laboratories to the outpatient building represented an opportunity to explore a new clinical model that integrates patient care, research, and education.

On the campus of Scripps Memorial Hospital La Jolla, a major redevelopment is underway as part of a 25-year master plan that was started in 2010. While the 43-acre (17.4 ha) campus is less constrained than Cedars-Sinai’s, the development goals are similar—to create a destination medical campus where patients will be able to address all their health care needs, from wellness and prevention to advanced diagnostics and treatment. By adding three new hospital towers, as well as two new medical office buildings, an outpatient-care pavilion, and research and graduate education facilities, Scripps is creating a fully integrated health care campus.

“We are moving from a model where patients are often handed off from their primary care physicians to specialists and traveling from one care setting to another for treatment, to a model where the medical team works hand in hand,” says Bruce Rainey, corporate vice president of facilities and construction at Scripps Health. An example of the new model is the relationship between the $456 million, 383,000-square-foot (35,600 sq m) Prebys Cardiovascular Institute, the first of the new hospital towers, under construction and scheduled to open in 2015 on the Scripps Memorial Hospital La Jolla campus, and the planned medical office building that will be attached to it. “The institute will provide cardiovascular patients with the most advanced treatment and surgical options, and the same physician team will be part of their continued care, right next door,” Rainey says. “It’s about providing better care that is also more cost-efficient.”

Scripps Health’s efforts to improve quality and, at the same time, control the cost of health care extend throughout its system, which includes four acute-care hospitals on five campuses—Scripps Memorial Hospital La Jolla, Scripps Memorial Hospital Encinitas, Green Hospital, and Scripps Mercy Hospital—and 23 outpatient facilities throughout San Diego County that are part of either Scripps Clinic or Scripps Coastal Medical Center.

“It’s a model that allows a physician to focus on practicing medicine, leaving paying the rent and staff and the administrative end of things to Scripps, which is attractive to many doctors,” Rainey notes. The expanded and integrated system, with its partner physicians, is helping Scripps reach out in the community where the patients live and where the shift from healing to wellness begins.

Like Scripps Health, the MemorialCare Health system is an integrated delivery system that includes six hospitals, three medical groups, an Independent Practice Association (IPA) retail clinic, and numerous outpatient health centers throughout southern California. Recently, hospital officials revisited planning options on its two Long Beach campuses where three of the hospitals—Long Beach Memorial, Miller Children’s Hospital Long Beach, and Community Hospital Long Beach—are located.

They evaluated the current condition of their facilities and analyzed potential development and relationships with the surrounding neighborhood to create a flexible plan for the future. “When the timeline for Senate Bill 1953 compliance—which was enacted in 1994 after the Northridge earthquake required all hospitals in the state to ensure that their acute-care spaces would be able to continue operation following an earthquake—was extended from 2008 to 2030, we realized that we had a longer planning horizon. We had time to develop a strategy for the campus that would support a changing health care model,” says Wendy Dorchester, chief planning officer at Long Beach Memorial.

What they developed was a strategy for their 60-acre (24 ha) health campus, a set of guiding principles, and implementation strategies. In addition to transforming the current hospital site to a better-planned campus, they sought several specific benefits that related to improved care, lower cost of care, and market position.

“The guiding principles we developed are important as they provide a means to measure the effectiveness of the plan in meeting our goals,” says Dorchester. “This is especially important because we set ambitious goals, like reducing operating costs by 25 percent.” The implementation strategies include the development of a robust ambulatory program, improvements to quality, patient environments and operations, and community and enterprise development, which includes partnering with others to make outpatient care more accessible for patients.

The major building programs on the campuses of Cedars-Sinai Medical Center and Scripps Memorial Hospital La Jolla, and those built to date at Long Beach Memorial, have been developed by the hospitals themselves. As nonprofit health systems, they rely on funding from a variety of sources including operating revenues, philanthropy, debt, and bond issues.

However, all three systems, like many others across the county, have both leased and owned off-campus facilities, including medical office buildings, clinics, and imaging centers. Health care providers’ evolving needs for a wider range of facility types and locations are spurring new development models.

Consider March LifeCare, an innovative and integrated health care campus with inpatient, outpatient, physician, medical, and surgical services—spanning birth to hospice care—that is planned for the former March Air Force Base in Riverside County, California. “It’s not just a medical center; it’s a medical city,” says Donald N. Ecker, founder and project leader at March Healthcare Development, the master developer for the new campus.

Ecker saw an opportunity in what he calls “the perfect storm”—the need for high-quality health care close to home, an aging population, increasing health care needs, devastating economic conditions, and the urban blight of unused land at the former March Air Force Base. What he first envisioned in 2004 as “the Mayo Clinic of the West” when he evaluated the excess land and decommissioned hospital on the air-base site has become much more. The current concept calls for a wellness campus, which at buildout would include a hospital, medical office buildings, a retail village, skilled nursing facilities, memory care facilities, a child care center, ambulatory care facilities, a continuing care community, assisted living residences, research facilities (in collaboration with the University of California at Riverside School of Medicine and the California Baptist University College of Allied Health), a community-based outpatient clinic for Riverside County veterans, wellness and healing gardens, restaurants, a spa and fitness center, a performance venue, and a hotel combined within one master-planned community encompassing 6 million square feet (557,000 sq m) of development space on 236 acres (96 ha).

Key to the success of March LifeCare’s vision are partnerships with like-minded organizations including hospitals, ambulatory surgery centers, physicians groups, and education and research centers. The scale and scope of the medical enterprise will engage the entire community, including the large population of veterans and their families. Ecker sees it as “transforming health care through collaboration.” As an example, the development’s first partner, Riverside Medical Clinic, has made a commitment to develop a medical office building and an ambulatory surgery center.

After eight years of planning, Ecker’s vision is moving closer to realization. Phase I demolition of buildings on the former Air Force base site is complete; the land is fully entitled; bids for the development of infrastructure were let in April 2012; and the parcel map for the entire development was scheduled to record in May, which will allow the sale of individual pads to interested health care organizations as well as to retail and mixed-use interests to open escrow. March LifeCare has raised all its funding through private sources. The March Joint Powers Authority, a commission composed of representatives from Riverside County and the cities surrounding the campus, has made an “enforceable obligations commitment” of $32.4 million based on a tax increment that the project will create over time.

While the development strategies for each of these institutions are tailored to the demands of their patient populations, campus conditions, and geographies, all are intended to create a more robust health care model—one that is efficient, effective, and engaged with the community.

Ambulatory care, whether on a hospital campus or off site in a neighborhood, just makes economic sense. The expense of high-acuity care in a hospital—from costs of facilities to clinicians—can be higher than that of less-acute treatments delivered in an outpatient setting. There also is a need to provide care, apart from the emergency room, when the doctor’s office closes at 5 p.m.

In addition to traditional partnerships, such as those with physician groups, health care organizations are looking beyond the boundaries of their campuses and into the community for kindred businesses, including health care–related retail, fitness, wellness, and support services. It is a new era for health care, and it will demand new development strategies from the health care community and its partners in city government and planning, and in the real estate and development communities.

]]>http://urbanland.uli.org/planning-design/development-strategies-for-a-new-era-of-health-care/feed/0Tokyo Poised for Return to the Global Maphttp://urbanland.uli.org/development-business/tokyo-poised-for-return-to-the-global-map/
http://urbanland.uli.org/development-business/tokyo-poised-for-return-to-the-global-map/#commentsWed, 11 Jul 2012 16:32:00 +0000http://urbanland.uli.org/news/tokyo-poised-for-return-to-the-global-map/With the world economy struggling and Europe facing deteriorating political, financial, and social conditions, participants at the ULI Japan Summer Conference in Tokyo speculated about the potential of the island nation as an international financial center and destination.

It has been 15 months since the devastating triple disaster struck north-east Japan. While much progress had been made in recovery, the Japanese government’s energy policy is still uncertain and Tokyo faces the possibility of power shortages over the summer.

Meanwhile, with the world economy struggling and Europe facing deteriorating political, financial, and social conditions, participants at the July 7 ULI Japan Summer Conference in Tokyo speculated about the potential of the island nation as an international financial center and destination.

“We have to come back to the top of Asia,” said keynote speaker Hiroshi Mizohata, special adviser to the Japanese cabinet. “We have to be hungry,” he said.

Mizohata pointed out that, unlike other countries in Asia such as Thailand and Singapore, Japan has not, until relatively recently, tried hard to promote tourism. The result is that Japan ranks 30th in the world for inbound tourism and 8th in Asia.

Strengthening tourism would certainly help Japan’s conference sector. “The challenge here is infrastructure,” said Mizohata who recently headed Japan’s tourism agency. He urged audience members to “develop the facilities to make Japan more competitive in the international market.”

Japan’s hospitality is widely admired, he said, but a lack of space in hotels and other facilities is often an issue.

Mizohata also urged the development of casino resorts in Japan, noting their role in Singapore’s tourism success. The Japanese government has been deliberating on casinos for a decade, but has yet to reach a consensus.

Japan’s proximity to rapidly growing nations in Asia means a huge market is waiting, said Mizohata. According to Japanese government estimates, 200 million people from China alone will travel abroad annually in 2020.

Tokyo as a Leading Metropolis

Tokyo, with a population of 35 million is the largest urban agglomeration in the world. Yet Japan’s capital is slowly losing international competitiveness, according to Professor Hiroo Ichikawa of Meiji University.

Leading the first discussion panel of the ULI Japan Summer Conference, Ichikawa focused on the Global Power City Index 2011, which he helped author for the Mori Memorial Foundation, which researches urban development for the purpose of building a sustainable society for the future

Of particular concern for Ichikawa was that the survey found Tokyo was “not liked by managers.” Among reasons given were Japan’s high corporate tax rate, the relatively poor accessibility of the Narita International Airport, and concerns about business continuity planning (BCP) in response to potential earthquakes and flooding.

On the other hand, Tokyo boasts safety, efficiency, hospitality, diversity of development, and a first class restaurant scene.

Japan’s capital trails New York, London, and Paris, but is still one place ahead of its closest Asian competitor, Singapore—at least for now.

“We need to figure out a grand design for Tokyo quickly,” said Ichikawa.

Junko Inokuma, Deputy Director of the government’s General Revitalization Bureau, said she was also “concerned about the competitive power of Tokyo waning.”

The government is now engaged in promoting Tokyo as an Asian business center and working hard to encourage companies to locate their regional headquarters in the metropolis.

Under consideration are corporate tax breaks, improvement in business support, living environment development, and strengthened business continuity planning.

Rebecca Green of Environmental Resource Management Japan agreed that disaster preparedness is a key issue. “We need to convince people that Tokyo is safe—especially foreigners looking to invest in the city,” she said.

Turning to her main area of expertise, she noted that Tokyo is a leader in greenhouse gas regulation and pioneer in cap and trade.

Nevertheless, one area for improvement could be regulation on soil contamination, which has proved a risk for some developers. Another is the relatively poor sustainability of older buildings. Incentives could help, Green said.

Takeo Nishitani—of Weber Shandwick Worldwide, the media relations company managing Tokyo’s bid for the 2020 Olympics—was bullish about the city’s attractions. “Tokyo has everything,” he said.

Reflection on the 2011 Disasters

Katsunobu Sakurai, mayor of Minami-Soma, a northeastern city hit by the earthquake and tsunami reminded conference participants of the trauma that Japan experienced in the prior year. Sakurai rose to global prominence following the devastation of March 2011 with an impassioned online plea for help. In 2011 he was named one of Time Magazine’s 100 most influential people in the world for his frank criticism of the government’s response to the crisis.

His sobering account of the disaster’s effect on his hometown began with a slide of destroyed paddies. One photo showed boats dumped in the grounds of an elementary school three kilometers (two miles) from the sea.

He lamented the lack of government support following the disasters and a lack of progress in dealing with debris.